Signs of life detected in hiring

ALEXANDRIA, VA.
June 5, 2009 11:07am

There might be some signs of life finally when it comes to hiring for job seekers in the manufacturing and service sectors, according to a report Friday from the Society for Human Resource Management.

The report comes out on the same day that the U.S. Department of Labor released its job loss figures for May – 345,000 people fired.

Its latest monthly “Leading Indicators of National Employment” survey shows June hiring expectations down compared to June 2008 in the manufacturing and service sectors, but the low expectations have slowly improved over the past couple of months.

The employment expectations index year over year change continues to be negative, however -- an unbroken trend since December 2007, when federal officials say the recession began.

“Even though the employment expectations indices for both sectors are still down for June compared with the same time last year, we are seeing a slight improvement compared to the past couple of months,” says Jennifer Schramm, manager of SHRM’s workplace trends and forecasting.

“If this trend continues, it could mean that we have reached bottom and hiring will slowly start to pick up again. But right now it is too soon to tell,” she says.

Compensation growth also continues to dwindle for new employees. May 2009 new-hire compensation rose at the slowest rate in four years in the manufacturing and service sectors.

While employment expectations for June 2009 continue to drag behind the previous year’s performance, more members of the manufacturing and service sectors will add to their payrolls in June than in the past several months, according to the survey’s results.

In the manufacturing sector, 24.5 percent of respondents said they plan to hire, while 25.9 percent will conduct layoffs. The 24.5 percent represents the highest percentage of manufacturing companies that will add jobs since November 2008.

“Employment levels in June will continue to fall, but not as rapidly,” says Steven Director, economic advisor for the SHRM monthly survey and professor and associate dean for the School of Management and Labor Relations at Rutgers University.

“Within the labor market the hole is still getting deeper, we are just digging more slowly,” he says.

In the services sector, a net total of 24.8 percent of companies will add jobs in June (41.4 percent will hire, 16.6 percent will eliminate jobs). The 41.4 percent of companies hiring represents the highest such mark since September 2008 in the service sector, and it nearly matches the June 2008 level of 41.8 percent.

As for the June outlook within the service sector, Mr. Director says, “There will be approximately the same number of expanding firms as there was a year ago. The problem is that, compared to a year ago, the number of firms with declining employment will almost double. The net effect will be higher unemployment.”

The survey’s recruiting difficulty index measures how difficult it is for firms to recruit candidates to fill the positions of greatest strategic importance to their companies.

In May 2009 and for the third consecutive month of the year, this index recorded single-digit response levels for those reporting increased difficulty with recruiting. In the manufacturing sector, a net of 23.8 percent of companies reported less difficulty with recruiting (3.0 percent had more difficulty, 26.8 percent had less). This is the first time in four years in May that more manufacturers reported an easier time recruiting as opposed to those who had more difficulty.

The gap was even wider in the service sector. In May, a net of 35.8 percent of companies had less difficulty recruiting (3.9 percent had more difficulty, 39.7 percent had less). With millions of people seeking work and fewer opportunities, this trend in the recruiting difficulty index is not likely to reverse in the near future, the organization says.

Although many companies have reduced hiring during the recession and are cutting jobs, more are turning to wage and benefit cuts in a continuing effort to control costs.

In the manufacturing sector, a net total of 0.1 percent of respondents said they decreased new-hire compensation in April (2.3 percent increased, 2.4 percent decreased). That is the lowest May response total in five years for manufacturers reporting new hire compensation increases, and the first May in the survey’s history that the net total has skirted into negative territory.

In the service sector, slashing salaries and benefits was even more pronounced in May 2009. A net total of 9.6 percent of companies reduced wages and benefits packages for new hires (3.8 percent increased, 13.4 percent decreased). This response total is also the lowest May number in four years and the first May in which the net total for this index was negative.

“We have seen a trend over the past few months of overall decreases in new-hire compensation. This is very unusual even during a recession,” says Ms. Schramm. “It is not yet clear what, if any, long-lasting impact on wages this downturn will have.”

Methodology

The LINE Employment Report examines four key areas: employers’ hiring expectations, difficulty in recruiting top-level talent, new-hire compensation and job vacancies—indices that are not seasonally adjusted. It is based on a monthly survey of private-sector human resource professionals at more than 500 manufacturing and 500 service-sector companies.